IMF Warns of a Protracted US Slowdown - 2001-08-14

The International Monetary Fund warned Tuesday that a prolonged slowdown in the U.S. economy could have negative effects around the world.

In its annual report on the U.S. economy, the IMF warned that a protracted U.S. slowdown would dampen prospects of a quick recovery in Asia and Europe.

Fund economists say the U.S. slowdown that began in late 2000 has been deeper than anyone expected. The report also calls attention to the high level of the dollar and warns that the dollar could fall sharply if investor sentiment turns sour. On a trade-weighted basis the dollar is 40 percent stronger than it was six years ago.

Financial analysts are divided about whether U.S. economic activity has bottomed out and is set for recovery. It's been seven months since the central bank began to cut interest rates in an effort to boost growth.

Charles Lieberman of the Advisors Financial Center already detects signs of a turnaround. "I think we've seen the worst quarters for GDP growth," he says. "I think we've seen the biggest job losses already, that was in the second quarter. I think consumers are going to continue to spend. I think some of the benefits of lower interest rates still lie ahead. I think the economy will improve in the second half of the year." Mr. Lieberman spoke on CNBC television.

In its report, the IMF said U.S. economic growth will total 1.5 percent this year, a sharp decline from the 4 percent growth of 2000.